Untitled Texas Attorney General Opinion ( 1957 )

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Honorable Alwin E. Pape Opinion No. W-243
County Attorney
Guadalupe County Re : Whether the CommissionersJ
Seguin, Texas Court of Guadalupe County
can sell government bonds
belonging to the permanent
school fund of said county
at a discount and,rel,ated
Dear Mr. Pape: questions,
Your request for an cpinion, dated June 28, 1957,
propounds the following questions for our consideration:
“1 . Can the Commissioners’ Court of
Guadalupe County sei~lcertain government bonds
at a discount and other bonds belonging to the
Permanent School Furidof Guadalupe County and
immediately purchase fro:?a bank, as an inter-
related transaction, certain bonds of ,the
Navarro Rural High School District at a .iis-
count of a certain amount so t&t the Coucty
Permanent School F’undwill not be Ioh-;:-Ted?
“2. Does the purchase of rural high
school bonds by ti;ePO’L;nt<-FermanerltSchool
F’und~ come within khe pu.?viewof Article ‘824,
c 311
TI.”>*L?o
.
With respect to lands gran.tedthe various counties
for educational purposes. Smntion 6, Article VII, of the Con-
stitution, provides, fr.part, that:
“Said lands p and the proceeds thereof,
when solid,shall be held by said counti,esalone
as a trust for the benefit of public schools
therein; said proceeds to be invested in bonds
of the United States, the State of Texas, or
counties in said State, or in such other securi-
ties, and under such restrictions as may be
prescribed by law; and the counties shall be
responsible for all investments; the in-terest
thereon, and other revenue, except the principal
shall be available fund.”
-- .i.
Honorable Alwin E. Pape, page 2 (W-243)
Article 2824 of the Revised Civil Statutes, authorizes
the investment of such proceeds in other bonds not theretofore
authorized. The additional authorization under this Article in-
cludes bonds of independent or common school districts.
The Commissioners' Court holds money belonging to the
county permanent school fund in trust for public schools, arid
cannot abuse this discreti.on. Delta County v. Blackburn, 100
Tex. 51. 93 S.W. 419 (1906). The authority of the commission-
ers' court to sell investment securities held by the Permanent
School Fund of the county at a price eaual to or greater than
the amount paid for the same has been recognized, Attorney Gen-
eral's Opinion O-5944 (1944). Rowever, it was held by Attorney
General's Opinion v-1089 (1950) that the Commissioners' Court
could not cash Government bond school fund investments before
maturity and reinvest in independent school district bonds hav-
ing a lower interest rate. We quote from the foregoing opinion
as follows:
"Under the facts submitted, the Commissioners'
Court would sell United States Government bonds be-
longing to the permanent school fund of the county
at a discount, thereby diminishing the permanent
school fund. It is our opinion that such a procedure
would be in violation of Section 6 of Article'VII of
the Constitution of Texas.
"If, on the other hand the government bonds in
question are sold at not less than par9 the Commis-
sioners' Court would have authority under Article
28.24to invest the proceeds in bonds of independent
school districts," (Emphasis added).
Attorney General's Opinion O-5944 (1944) recognized
the right of the Commissioners ' Court +o sell bonds at 85$ of
par value which were purchased at 629% of par value. But the
opinion only recognized the authority of the Court to sell
bonds belonging to the Permanent School Fund "at a price 'equal
to or greater than the amount paid for the same."
Since the Constitution makes the Commissioners'Ccrurts
trustees of the Permanent School Fund of a county for the bene-
fit of public schools, it was held in Delta Countv v. Blackburn,
m, that the Commissioners1 Court could not reduce the in-
terest rate on a note from seven percent to three percent.
The proposed transaction contemplates a sale of gov-
ernment bonds belonging to the Permanent School Fund of Guada-
lupe County at a discount. It further contemplates, as a
Honorable Alwln E. Pape, page 3 (W- 2431
second step in the over-all transaction the purchase of bonds
issued by the Navarro Rural High School'District. We do not
inquire into the ability of the Commissioners' Court to pur-
chase bonds at such a rate of discount as to compensate for the
loss incurred in the sale of the government bonds. Even though
the proposed sale and purchase be interrelated from the stand-
point of time, or otherwise, we think it clear and fnescapable
that one of the basic features of the proposal is tie saie of
government bonds belonging to the Permanent School Fund at a
discount. This the Commissioners' Court is not authorized to
do even though by subsequent investments, wisely Randprudently
made, it might be able to recoup the loss.
Your first question is accordingly answered in the
negative. It is therefore unnecessary that xe answer the second
question.
SUMMARY
The Commissioners9 Court of Guadalupe County
cannot sell certain government, and other bonds,
belonging to the Permanent School Fund of said
county for less than the purchase price thereof,
and immediately purchase, as an interrelated
transaction, certain bonds of the Navarro Rural
High School District at a discount.
Yours very truly,
WILL WILSON
Attorney General of Texas
Leonard Passmore
LP:pf:wb Assistant
APPROVED:
OPINION COMMITTEE
H. Grady Chandler, Chairman
C. K. Richards
Elbert Morrow
Howard Mays
REVIEWED FOR THE ATTORNEY GENERAL
BY: Geo. P. Blackburn